If there's one thing the recent Bank of America Corp. (NYSE: BAC) settlement proposal demonstrates, it's this: Calling the easy treatment that big banks have been enjoying in recent court and regulatory actions "a travesty of justice" is like calling the Grand Canyon a ditch.

In fact, the truth is this: Given the activities U.S. banks have been involved in during the past two decades, and the actions they've taken, we'd be justified in labeling these institutions as "criminal enterprises." The billions of dollars in penalties the banks have had to pay during this stretch are evidence of such activities, but are really only token payments given the magnitude of the damage these enterprises have caused.

The Bank of America Settlement

The Bank of America settlement offers us a real-life illustration of what I'm referring to.

BofA is close to settling with 22 large investors over failed mortgage-backed securities (MBS). But it may only have to pay $8.5 billion to investors who claim that Countrywide Financial Corp. – which BofA acquired in 2008 – lied to them about the value of the mortgage-backed securities they purchased.

If you do the math, the Bank of America settlement would result in payments of less than 5 cents on the dollar. But what's even more grotesque about this proposal is that it would "wall off" the bank from any other suits or losses on the pools in question – even though hundreds of other investors were also harmed by the sunken securities.

We'll soon see if a court approves the settlement. All hell will break lose if that happens.

And it should. But that's just one case.

The big picture is downright ugly.

Beating the Wrap

The clearest manifestation of the financial industry's power is its ability to consistently avoid criminal charges for egregious acts and barter its way out of serious harm by accepting civil charges and paying off its keepers so this sector's players can continue to run free.

The numbers are staggering when you consider:

The hundreds of millions of dollars that banks were fined for their dot-com-bubble "pump-and-dump" scheming back in 2000.

The $550 million that Goldman Sachs Group Inc. (NYSE: GS) paid to settle allegations that it defrauded its own client in a single deal that came to light last year.

The $100 million Citigroup Inc. (NYSE: C) had to pay to settle allegations of misconduct stemming from its sale of auction-rate securities.

And the hundreds of millions in fines JPMorgan Chase & Co. (NYSE: JPM) paid to settle allegations that it defrauded investors in a single collateralized debt obligation (CDO) sale, for bribing public officials in Jefferson County, AL, over a muni-bond scandal, and for bid-rigging to win business in 31 states.

That's a pretty dramatic list. And, yet, I'm not even scratching the surface.

There's not enough space in this story to list all the fines that every major bank in the United States has had to pay to settle "allegations" of wrongdoing.

But rather than subjecting the institutions and their executives to criminal charges and trial for engaging in patently illegal activities, the very system that is supposed to be policing this activity and protecting taxpayers is letting clever lawyers dance over our justice and regulatory systems – with a wink and a nod from their partners at the U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC).

Years ago, the Justice Department devised this idea for dealing with juvenile offenders and those involved in minor drug offenses: If the defendants kept their noses clean and adhered to agreements stipulating good behavior for a specified period of time, the prosecution would be deferred.

Of course, it didn't take long for clever lawyers to lean on the DOJ, and eventually the SEC and other judicial and regulatory agencies, to give their clients – big banks – deferred prosecutions.

"The corporate crime defense bar has this down to a science," Russell Mokhiber, editor of the Corporate Crime Reporter, told TheNew York Times. "I interview them all the time, and they boast about how they've gamed the system."

Deferred-prosecution agreements are secret. The internal investigations are "private" and there's no transparent "discovery" process that can be checked by outsiders or used by other claimants who want to sue these banks and their executives.

Without admitting or denying wrongdoing, it's hard for any other aggrieved parties to use the levied fines as evidence that criminal activity took place, even though it's a given.

How and why the DOJ, federal courts, the SEC, and Congress are protecting these crooked moneymaking machines needs to be addressed openly and honestly.

If it isn't addressed, the situation will only deteriorate from here.

And where we are now isn't pretty.

The Quiet Coup

If you want to get an idea of how financial services, and in particular the banking industry, have hijacked the U.S. economy, just look at how they've grown.

In that article, Johnson points out that from 1973 to 1985 the financial sector never earned more than 16% of domestic corporate profits. But in the 2000s, that figure rose to 41%.

Compensation in the financial sector during that period surged just as appallingly. That is, from 1948 to 1982, average compensation in the financial sector ranged between 99% and 108% of the average for all domestic private industries. Starting in 1983, however, it began to shoot drastically higher – and reached 181% in 2007.

Bankers enjoy extraordinary rich personal compensation. But more importantly, the money their institutions make is spread across the political spectrum, greasing the wheels that grind out favorable legislation crafted by both Democrats and Republicans.

The Final Word … Until Next Time

The amount of money that banks have spent on lobbying and campaign contributions, to elevate political hacks to positions of power in Congress (and later to pay off these same hacks by hiring them as private-sector consultants, investment bankers, and board members) would fill volumes, turn stomachs, and prove once and for all that America is run by bankers.

Simon's article clearly defines the ramifications of the banking industry's power – especially when he says that:

"The crash has laid bare many unpleasant truths about the United States. One of the most alarming is that the finance industry has effectively captured our government – a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF's staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we're running out of time."

We started by examining the Bank of America settlement, and have concluded with this final word. The message we come away with is clear: If we continue to let banks run amok – and allow them to avoid any consequences – it won't be long before the next financial crisis hits.

And when it does, it will be even bigger than the one that we continue to suffer through.

Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains.Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.

What may come as a surprise to you that the criminal act you referring to comes from a bank that has rescue our banking system and payed with hard err money the other bankrupt institution if was for them nobody would have bought them with the consequence of no lawsuit and no restitution so you r only pointing your finger to a saver!!!
Which is now paying the hight cost of a lemon law not been apply!!!!!!!

I once again I take off my hat off to your extraordinarily candid and damning analysis of the financial industry.

Rarely in history have so few, earned so much, producing so little, while hurting so many.

I couldn’t agree more with your overview of the current situation. Nonetheless, because of disagreements I’ve had with you in the past, I can only assume that our solutions to this dilemma would probably be quite different. Here’s what I propose:

1. Criminally prosecute all of those who can be found culpable and suspend deferred prosecution agreements (I bet you’d agree with that).

2. Break up all of the large banks that have now become even bigger due to the too big to fail bailouts.

3. Force banks out of FDIC insurance if they insist on maintaining trading operations. In other words, banks that gamble with people’s money shouldn’t have guaranteed deposits.

It’s my firm belief that holding bankers accountable, breaking up the banking monopolies, and eliminating the moral hazard caused by FDIC insurance when banks trade with the insured funds would go a very long way in beginning to right the wrongs of the banking industry.

I totally agree with this article, however there seems to be no real way to stop the banks and financial industry in general from buying congressmen/women. I vote for people that would try to turn things around when the opportunitity arises but frequently the vote is for bad or worse. Even some who start out trying to do the right thing sell their self out to get re-elected. Get more discouraged every day.

Mr. Galani,
I find it hard to disagree with the facts you have laid out, but I do believe the fault lies with the Regulators! Ever since Citigroup was formed and the separation of Banks and Broker firms became a reality, the Regulators did not keep up. True for those working in these Bank/broker combinations it seemed that the Regulators had doubled. Unfortunately, the ills you outlined should have been prevented! Having put together portfolios of securities that were then offered to the public before Citigroup, I felt that the SEC had been thorough in questioning the validity of our offering. After Citigroup was formed I noticed competitors offering bonds and bond products that were ultimately backed by mortgages. No details were given for the mortgages, but some of the sales reps used the term "non-callable"! As interest rates declined many of those non-callable investments were in fact called!
That is just one small example of the laxity of the SEC and other Regulators that only got worse. Now new regulations have been put into place that haven't been clearly defined. We did not need new regulations, just intelligent follow up to the existing regulations. Companies like Citigroup have been called too big to fail. I remember when it would not have been allowed to be created because of anti-trust and monopoly concerns. Subsequently the folks in DC (District of Confusion) forced the combination of powerful brokerage firms Morgan Stanley and Smith Barney into the largest Retail Brokerage firm that there is!!! There are not less then a dozen large brokers and most are also banks. I do not feel comforted with the past and current Regulatory environment being controlled by DC.

Thank you for the article by Mr. Gilani on the Banks. It is now time to list all the members of the House and Senate who have made all this possible by aiding and abetting the bankers in their criminal activity. A law suit needs to be filed by the people against our Members of Congress for their collusion with the banks.

A court outside the Department of Justice "by the people" to assure fairness would be a good start.

Read the book; "The Creature From Jekyll Island." Most people lay a lot of blame on unnamed "corporations" or "Wall Street" for the condition of the economy and bilking the "little guy" out of his hard earned money. But, the truth is that the power behind the throne, so to speak, is the international banking cartel. And this article is evidence of the power they posses.

You're right, BUT, realize why this occured. Congress forced banks to lend money regardless of the persons ability to pay . People didn't pay. So, on one side you have folks depending on the strength of a security, on the other you have people who could care less about paying. You have the bank in the middle.
How is this Fair? The bank will never be able to recoup the lent funds, and you have the bank paying out "damages". To a security mind you. Something that was never guarenteed in the first place.
How is this fair? All you're doing is making a run on the bank. AND, the feds want the banks to forgive the lent money… really??

I am one that does believe that our justice system has a serious problem , here in Tennessee there was a banker that worked as a service manager for Regions bank that now we find out has plead quilty and will spend up to 4 months, wow. The judge said at her age and no priors and they only stole from us they went light on her give me a break, they stole over 5 million dollars acourding to the state, but we can prove there was a lot more more like 10 million dollars, that right 10 million US dollars, she gets 4 months give me a break please go to face book to Take A look we need America to hear our story thank you Terry.

I am well aware of the financial industry's take-over of our political and regulatory system. And Shah is right, if we don't correct it, then the financial sector's "absolute power" will ruin our political and economic system for everyone. What happened to Greece is indeed ugly. It would be doubly so if it also happened to America. The big trading houses have the power to bring down whole countries. Europe beware!

Fo us, its not a question of how; whether it is another financial crisis or a "depression". All our property ($) and standard (of living) is at risk. Unfortunately, there is nothing anyone can do about it, for now anyway. President Obama as a candidate, said he would do something about this unfairness- but then appointed many of the very same insiders that were responsible for the problem in the first place, such as insider/hack Larry Sommers (Sec. of Treasury under President Clinton) and Sec. of Treasury Tim Gainter. President Obama merely continued the status quo here. I am not hopeful.

The movie "Inside Job" really spells it out. Here is one graphic example: The Mississippi State Pension Fund sued Goldman Sachs for Fraud in Federal District Court. The average Mississippi government retiree (pensioneer) receives $18,500/year. The average employee at Goldman Sachs in 2005 received $600,000 in annual compensation. The big dog, then CEO of Goldman Sachs Henry Paulson (President George W. Bush's Treasury Secretary) received $30,000,000 in total compensation. Talk about Robber Barrons!

Former New York District Attorney, Elliot Spitzer, got forced out of the Governorship partly because of a prostitute who testified against him. In interview, Mr. Spitzer mentioned that no matter how many cases he brought against hedge funds or banks while AG, no prostitutes "flipped" against high level bankers in exchange for immunity. Nobody wants (dares) to cross the bankers.

So, first thing, we need is a president who is willing to spearhead a series of prosecutions against current or former U.S. BANKERS who have done wrong and effectively undo some of these questionable "deferred prosecutions". Until accountablility is restored, our system will not only be flawed, but increasingly irrelevant. We could all become improvished as a result of our public apathy.

Oh, I forgot to mention. The movie "Inside Job" claims there are 3 financial lobbists per individual Congressman. So, who owns Congress (Republican or Democrat) you the voter or the financial oligarchs ( U.S. BANKERS)? No wonder candidate Barack Obama brushed-off "Joe the Plumber's" concerns from Main Street. He could care less about guys like Joe. Instead, its more like a formal White House dinner with Joe the U.S. Banker

Your article failed to mention the fact that Bank of America was not the entity that was at fault. It is the very fact that BAC rescued Countrywide that enabled the investors in the countrywide MBS to recoup any losses. The former countrywide is still an independent legal entity. If BAC decides that enough is enough, they could put the former countrywide into the bankruptcy process. Who would these investors go after when that happens?

If you didn't do your own due diligence you are on the road to ruin. BoA tried for years to sell me MBS, REITS and all kinds of other financial trash. I didn't buy because they "guaranteed" these instruments would only go up. What goes up can ( and will) also go down. Sooner not later even "too big to fail" will also be proven untrue.

On a much smaller scale, what does this settlement, if it's approved, mean for homeowners whose loans were bundled in these mortgage backed securities that are the subject of these lawsuits? Would Bank of America own them instead of the investors that sued? Would that mean that Bank of America is sitting on billions of dollars in loans instead of these investors? Can anyone predict how Bank of America would handle modifying mortgages now as a result of this settlement?

By the way, I pretty much agree with everything everyone is saying here.

President of the US is a powerful man. Take W. Bush, he goes on national TV and orders Saddam H. to get out of his country in 24 hours. The elected leader of a sovereign country, worlds #2 oil producer, cradle of civilization Saddam doesn't comply and Bush orders bombing of Iraq. Destroys main govn bldgs. Saddams homes and govn. palaces. Obligates the US for multi billions exp. and untold human lives. No one really complained too much. President Obama comes along and continues most Bush policies, continues wars, etc. but a dept. to protect consumer affairs is started and not much said even then. Elizabeth Warren is Obama pick to run it and this was 10 times worse than any war. This isn't the SEC who may investigate someone if they are competition to the 5 New York crime family banks or the CFTC or other "SELF REGULATING" Scams. This is a woman who everyone knows will see that everything is fair and can't be bought. A line was drawn in the sand. Every Rep., every Lobbyist, every banker, the Fed. reserve etc. just stated it will not happen. Because everyone knew this woman was going to see that the consumer got fair treatment, not unfair advantage like banks have enjoyed forever but equal. That was unacceptable and the President of the US understood he didn't have this kind of power. He could bomb another country and take thousands of lives, right or wrong but never could he limit stealing and fraud by US banks. They can stop the President of the US if he attempts to limit their stealing and they proved it.

Bank of America can do what they want can't they? I was approved for a modified loan, made 6 payments, everything's good right? Wrong, I got a letter stating my home is in foreclosure, i called the attorneys, they say call the bank, the bank, well they tell me a different story every day, and transferred me at least 2 times a call…. I'm going crazy with these people and different answers, I don't have time to play games with my home, where am i going to go? I didn't even get a months notice and I don't know which one of the people at Bank of America to believe…. bank of America makes their own rules and gets away with it…. so far thats how it looks…………..

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